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Hurricanes Harvey and Irma give Fed more reasons to hold interest rates for the rest of 2017, experts say

9/13/2017News

Economic disruptions caused by a back-to-back pummeling from hurricanes in
the United States may just seal the deal for the Federal Reserve to hold
interest rates intact for the rest of this year, experts told CNBC on
Monday.

Hurricane Irma is still making its way up Florida's coast, but Goldman
Sachs and Bank of America-Merrill Lynch have slashed their growth projections
for the third quarter by 1 percentage point and 0.4 percentage point,
respectively, due to Hurricane Harvey, which hit Texas and Louisiana.

"I think it may be an excuse for the Fed to hold back again from raising
interest rates. I think that will be a logical conclusion," Hugh Young, Aberdeen
Standard Investments' Asia head, told CNBC's "Squawk Box," on Monday.

Fed officials, in their most recent projections, had indicated one more
rate hike this year on top of the two they already approved in March and June.
But weak inflation data have led to dovish statements from Fed speakers, leading
market participants to believe the next hike won't happen until well into
2018.

New York Fed President William Dudley, in an interview with CNBC on Friday
when Irma was poised to begin battering Florida, acknowledged that the two
hurricanes could impact the timing of rate hikes. But he said rebuilding efforts
following the storms will boost economic activity in the long run.

Will Irma hurt the economy?

10:49 PM ET Sun, 10 Sept 2017 | 02:33

Beyond the hurricanes, there are other factors standing in the way of a
rate hike this year.

One factor is the uncertainty over who the next Fed chair will be, noted
Frank Lavin, chief executive of business consultancy Export Now.

"Don't forget we've got several Fed vacancies now and that typically,
historically, mitigates against Fed movements because everybody takes more of a
wait-and-see attitude. They don't want to politicize the hearings of the next
chair … so everybody tends to just quieten down a bit," he said on CNBC's "The
Rundown" on Monday.Insurance firms will take earnings hits

As market participants continue to ponder the timing of the Fed's next
move, what's certain for now is insurance and reinsurance firms will take a hit
to earnings due to the back-to-back hurricanes, the experts said.

"I think by and large, for the re-insurers and the primary insurance
companies as well, this is going to be an earnings event. You'll see this ease
into earnings. By and large, not everyone will report profits for the full
year," said Elyse Greenspan, equity research analyst at Wells Fargo Securities,
on CNBC's "Squawk Box" on Monday.

Greenspan projected the insurance industry to lose around $60 billion, with
$40 billion from Irma and $20 billion from Harvey.